The Case for Benchmarking Your Sales Data

Every good sales manager tracks important numbers like sales rep turnover, customer share of wallet data, pipeline-to-sale ratios, and more. But knowing those numbers and knowing what to do with them are two different things entirely. For instance, if your turnover is 48 percent, is that good or bad? How does it compare with the figures at other companies in your industry? Is it an area you should be focused on or are there other issues that would provide a greater return on the investment of your time?

Delving into these kinds of questions is the specialty of Sales Benchmarking Index (SBI), an organization that brings the discipline of benchmarking to the art of sales (www.salesbenchmarkindex.com). “Benchmarking is a process where companies compare their performance over time against their competition,” explains SBI Managing Director Greg Alexander. “You’ll find there are areas where you are better than most. You’ll also see areas where significant improvement is available. The point of benchmarking is to focus your efforts where you can get the best return.”

During a recent Webinar called “Sales Benchmarking: Finding and then fixing what’s wrong in your sales organization,” Alexander shared his five-step benchmarking process. Here’s a look at each step:

Step 1: Identify the Metrics. Identify the metrics that are most relevant to your business. Choose metrics that are leading, not lagging, indicators to the state of the business, adds Alexander, and choose metrics for which you have the data. Alexander used cost of sales turnover as an example during the Webinar and we’ll follow that metric here.

Step 2: Collect the Data. Once you’ve decided what you want to track, you need to collect the internal and external data to build your case. Start with your internal data. For cost of sales turnover, you’ll need to look at numbers from finance, payroll, expense reports, and so on. For external reports, contact market research firms that track the type of data you’re looking for. “Getting external data can be the most expensive, labor intensive part of the process,” warns Alexander.

Step 3: Compare and Contrast. Here’s where you take your internal baseline data and compare it to your peer companies so you can determine how you’re doing on a relative basis. Going back to the cost of sales rep turnover example, say your annual turnover rate is 44 percent at a cost of $850,000 per sales rep. For every 100 salespeople, that’s a $37.4 million problem annually. Now say the average turnover in your industry is 40 percent at a cost of $750,000 per rep. For every 100 reps, it costs others in your industry an average of $30 million. By addressing this problem, you would boost your bottom line by $7.4 million for every 100 reps in your company.

When you do this kind of analysis for multiple metrics, you’ll find there are areas where you are doing better than the external benchmark and areas where you’re performing below that benchmark. You will usually get the most improvement with the least effort by working on the areas where you’re performing below the benchmark, says Alexander.

Step 4: Focused Action. Armed with all the information to date, develop some hypotheses for why things are happening. If your turnover is higher than the industry average, perhaps your company is making poor hiring decisions. Or perhaps reps aren’t getting enough support from their direct managers. Or maybe reps aren’t getting the training they need to succeed. Whatever the issue, figure out the root causes of the problem, develop solutions that target those root causes, and pilot test them. From there, you can go to the organization as a whole and implement the solution company wide.

Step 5: Sustained Improvement. Sales benchmarking is not a one-time project, but an ongoing effort, concludes Alexander. It takes a lot of effort the first time you do it, but once you’ve got the process down, it becomes much easier. And always remember the ultimate goal is sustained competitive advantage. “Your competitors are not going to stand still,” says Alexander. “Sales benchmarking must become a standard operating procedure and part of your long-term strategy for success.”